John Grill, former chief executive officer at WorleyParsons Ltd. (WOR), said demand for engineering skills outpaces supply in Australia, driving wages 50 percent higher than anywhere else in the world.
Labor shortages also have driven pay higher for welders, pipe fitters and electrical workers, Grill said yesterday on the Australian Broadcasting Corp.’s Inside Business program.
“We had a period of 25 years of very little that was built so there were very few people trained in the trades,” said Grill, who plans to return as chairman in 2013. With the growing number of projects now, “we have a problem.”
Energy companies from Chevron Corp. (CVX:US) to Woodside Petroleum Ltd. (WPL) are currently building seven liquefied natural gas projects in Australia at a cost of about $180 billion to feed Asian demand. Chevron is reviewing the cost of its A$43 billion ($45 billion) Gorgon LNG venture off northwest Australia, partly because of a rise in labor expenses, it said in July.
While Australia’s economy has been powered by the biggest resources bonanza since a gold rush in the 1850s, falling commodity prices have spurred miners BHP Billiton Ltd. (BHP), Xstrata Plc (XTA) and Fortescue Metals Group Ltd. (FMG) to delay some projects. The Australian government estimated in June the country had a resources development pipeline of about A$500 billion, driven by Asian consumption of iron ore, coal and gas.
New Project Questions
“We’ve got an ever-growing level of export of resources from Australia,” Grill said yesterday. “Whether we’re going to get new projects to follow the ones currently being designed and constructed is another question, and I think those costs within Australia, those questions are yet to be answered.”
Grill said he agreed high costs in Australia, partly because of gains in the Australian dollar, have put proposed resources ventures in the country at risk.
“I’m sure that’s right,” he said.
The engineering companies that service the resources industry have also been hit by falling commodities prices. WorleyParsons, Australia’s largest oil and gas engineering company, plunged the most in more than two years on Oct. 23 after forecasting first-half earnings below analyst estimates.
The Sydney-based company, which gets about 68 percent of its sales from the oil and gas industry, said last week clients were “more cautious in their planning” and were content to delay projects to keep down costs.
Salaries for oil and gas workers in Australia rose 17 percent to average about $169,000 a year, more than double the global level, as LNG ventures competed for workers, Hays Plc (HAS) said in February. The global average was about $80,000, Hays found in a survey analyzing salaries in September and October 2011 for professionals including geologists and engineers.
Australian engineering salaries are highest in Western Australia and Queensland, where most of the resources projects are being developed, according to Grill.
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